The dollar rose on Friday, boosted by increased expectations of monetary easing by central banks in Europe and Japan, and by a bump in global equities and oil prices that renewed market risk appetite. The dollar rose to a two-week high against the yen, which has had its year-to-date gains versus the greenback cut nearly in half over the past two days.
Bank of Japan Governor Haruhiko Kuroda said Friday there is further room for the BoJ to expand its quantitative easing program if inflation continues to wane. That would reduce the value of Japan's currency, making it less attractive to investors. The dollar rose 0.9 percent to 118.75 yen.
Kuroda's comments came a day after European Central Bank chief Mario Draghi said the bank would need to review its policy in March, which was read by markets as a promise of more easing. The euro fell below $1.08 to the dollar for the second time in as many days, nearing a two-week low. The euro zone single currency was last down 0.75 percent at $1.0790.
The rebound in global equity markets also played a major role in the dollar's rise against the yen and euro, said Shaun Osborne, chief currency strategist at ScotiaBank in Toronto. World stocks recorded their biggest rise in a month and the S&P 500 followed the lead, rising 1.7 percent. "The rebound that we've seen in stocks has perhaps started to encourage people that we may be close to a low point for the equity market sell-off," Osborne said, which was leading investors to sell the yen and euro.
"We've also seen a pretty significant rebound in oil prices," he added. US crude future rose 8 percent Friday and were on track for their first weekly gain this year. Prior to Thursday and Friday's gains, oil and global equity markets had declined 25 and 10 percent respectively in 2016.
Generally, the dollar's strength has contributed to weakness in oil. However, crude's rebound now suggests improved overall global sentiment. When sentiment is strong, investors borrow in the yen and euro to put money into higher-yielding currencies; the United States has higher interest rates than Japan and the countries of major European markets. The dollar index, which measures the greenback against a basket of six other major currencies, rose 0.51 percent to 99.557. Currencies tied to oil production were also stronger on Friday, particularly in emerging markets. The Mexican peso rose 1.6 percent against the dollar and the Russian rouble jumped 5 percent.